Housing developer levy funds fail to reach local communities due to systemic problems - PAC report

- Unacceptable number of affordable homes funded by developer contributions sit empty

- Councils often outmanoeuvred by developers due to asymmetry of skills, PAC report finds

The system designed to create new affordable housing and infrastructure through developer contributions is not working properly. In a new report, the Public Accounts Committee (PAC) identifies a number of problems which stop the developer contribution system working as effectively as it should, and highlights the unacceptable issue of unsold developer-funded homes sitting empty.

The PAC's inquiry heard evidence from the Home Builders Federation that at least 17,000 affordable housing units, provided through Section 106 (S106)* agreements between developers and planning authorities, are sitting unsold. However, the government's S106 Affordable Homes Clearing Service, which aims to solve the problem of developers struggling to sell their affordable homes by connecting buyers and sellers, has only around 800 unsold homes listed on it. When the PAC's inquiry challenged government on this significant disparity, officials were unclear as to why it existed. The report calls on government to better diagnose the extent of the S106 affordable housing problem.

The report highlights the serious problem of a lack of staffing capacity and capability of planners in local authorities. The PAC is unconvinced government is adequately addressing this, with the report finding the issue is largely due to the working environment, caseloads, pay, and more attractive opportunities in the private sector. Over half of English local authorities struggling to recruit planning officers in 2022, according to the Local Government Association.

This imbalance between the public and private sector mean that larger developers are generally better resourced with specialist negotiators. The report warns this asymmetry of skills also means that councils often find it hard to challenge developers' claims when it comes to their viability assessments of whether sites are financially feasible. Communities may therefore fail to receive the developer contributions to which they are entitled. The PAC's report calls on government to provide new guidance for councils, balancing the need for flexibility in negotiations with the need to dissuade developers from gaming the system.

Another systemic issue with the developer contribution system described in the PAC's report is a fall in the number of councils with a local plan. Without one, planning authorities risk not being able to meet local demand for new homes and may not be able to coordinate the appropriate amount of developer contributions. The PAC's report finds a significant fall in up-to-date plans – from 149 English local planning authorities in 2019, to only 86 (29%) now.

The report further finds that only half of all local authorities were operating a Community Infrastructure Levy (CIL) in 2024. The CIL is intended to make getting contributions from developers fairer, faster, and more certain and transparent, and the PAC recommends that government identify areas where CIL ought to be viable and encourage wider take-up of it where appropriate.

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said: “This country is in the middle of an acute housing shortage, and families around the country have long been unable to access the homes they need as a result. To see any affordable home sitting empty in this context is a senseless, wasteful system failure. Even more frustratingly, the government's tally of how many unsold S106 homes there may be is miles wide of the sector's own figures. By the sector's accounting, a good proportion of the new affordable homes required in a year, 17,000 of them, may be waiting out there unsold – but the government could not explain the wide disparity between this figure and the 800 homes it has itself listed as available. This state of affairs must not be allowed to continue.

“The government has understandably reached for planning system reform as a lever to unlock growth. Our report demonstrates the scale of some of the problems it has to unpick, in particular the drought of planners in local authorities. Without a functioning pipeline of highly-skilled planning professionals, councils will continue to be outmanoeuvred in any negotiation with developers in affordable homes negotiations. Given the government's ambitions for huge increases in housing numbers, there are valid concerns that infrastructure construction will lag behind. It's even more important that the developer contribution system works properly to keep up with planned supply. If government is serious about making the developer contribution system work properly, it must show how it is going to address this problem, as well as the other systemic issues articulated in our report.”

Notes to editors

* S106 agreements are negotiated between developers and planning authorities on a case-by-case basis, setting out the terms on which developers must provide or fund affordable housing, infrastructure and services, in order to make a development acceptable through the planning system. Developers rely on bids from registered providers of social housing (RPs) to buy the Section 106 affordable homes they deliver.

The National Audit Office's June 2025 report lays out (p. 32) a number of reasons given by government, Homes England and the sector as to why developers have recently been struggling to sell S106 affordable homes - increasing cost pressures, quality concerns, the types of housing on offer, and a lack of transparency were all cited.

PAC report conclusions and recommendations 

The Department does not have a sufficient understanding of why the developer contributions system is not working effectively.The government requires all local authorities that receive Section 106 monies or the CIL to publish annually an infrastructure funding statement. These statements are the Department's main source of data about developer contributions, and it reviews them annually. But the reviews are incomplete because they do not include data from LPAs that fail to produce an infrastructure funding statement. As at December 2024, 17% of LPAs had not published one for 2022-23, and in mid-2025 the Chief Planner wrote to every LPA to remind them of their statutory obligations to do so. Additionally, the Department's reviews do not capture 'in-kind' Section 106 contributions of infrastructure or land, and it uses estimates for the value of affordable housing contributions. There is no database of developer contributions, which means information at a national level is limited, and best practices not being shared. The Department believes it has reasonable data, in broad terms, on levels of infrastructure being provided, but accepts that it can improve.

Recommendation 1.

1. a) The Department should improve its data collection from infrastructure funding statements to provide a more complete and timely understanding of the situation; and
2. b) The Department should also ensure that LPAs are completing infrastructure funding statements in line with their statutory duties.

The number of local planning authorities with an up-to-date local plan has fallen significantly since 2019. As at February 2025, only 86 LPAs – 29% of all the LPAs in England – had adopted a local plan in the past five years. By contrast, in February 2019, 149 LPAs had an up-to-date local plan. This Committee has previously reported on the number of local authorities without an up-to-date local plan, which takes on average seven years to produce. Without an up-to-date local plan, LPAs risk not being able to deliver the new homes needed to meet local demand and may not be able to coordinate the appropriate amount of contributions from development. The Department states that it has provided nearly £30 million to LPAs to speed up local plan production ahead of a new local plan system coming into operation in 2026. It expects a much higher number of LPAs to have an up-to-date local plan by the end of this Parliament. The production and revision of local plans is far too complicated, as it requires a great deal of predictive information which is often inaccurate.

Recommendation 2.   In its Treasury Minute response, the Department should provide the Committee with further details of:

• how it will use its statutory powers to ensure that LPAs produce an up-to-date local plan; and
• if it will examine the local plan making system to make it simpler and shorter, drawing up a revised local plan.

There are additional local planning authorities for whom starting to operate the Community Infrastructure Levy would be both feasible and beneficial. In November 2024, only 52% of all LPAs were operating the CIL. The CIL was intended to make getting contributions from developers fairer, faster, and more certain and transparent. Payment by developers is generally up-front and non-negotiable, and LPAs may spend the monies on infrastructure across the local area, rather than being limited to a specific site.  However, the CIL has some limitations, including being resource-intensive and time-consuming to set up, creating a barrier to introduction, and it cannot be used to part fund social housing. There is also often less take-up in areas with lower land value. The Department explains that some LPAs may have delayed introducing the CIL because they were waiting to see the outcome of plans to introduce the previously proposed new infrastructure levy, which would have largely replaced the current system. However, the Department accepts that it would potentially be useful to identify LPAs where CIL ought to be viable but where there are other reasons why it has not been introduced.

Recommendation 3. The Department should work more proactively with the Planning Advisory Service, to identify LPAs where CIL ought to be viable and encourage wider take-up of the CIL where this is appropriate.

We are unconvinced that the Department is adequately addressing staffing capacity and capability issues within local planning authorities. Research from the sector suggests staffing in LPAs is a serious problem. The Royal Town Planning Institute's 2023 State of the Profession report found that, in the period 2013–2020, around a quarter of planners left the public sector, while the private sector grew by two-thirds. A 2022 survey by the Local Government Association found that 58% of local authorities in England experienced difficulties in recruiting planning officers. Staffing issues within LPA planning teams are largely due to the working environment, caseloads and pay, and many planners find opportunities in the private sector more attractive. Additionally, the imbalance in capacity and capability between the public and private sector mean that larger developers are generally better resourced with people who have specialist negotiation skills. The Department states that it will provide around £12 million for the recruitment and retention of planners, for a graduate scheme and to encourage more mature professionals with multidisciplinary expertise into LPAs. It also points out that there is a provision in the Planning and Infrastructure Bill that will allow LPAs to set their own planning fees, which should help them improve their staffing and service levels.  

Recommendation 4. Alongside the Treasury Minute, the Department should write to the Committee setting out, in detail, how the Capacity and Capability Programme will improve the pipeline of new planners and help LPAs to retain experienced planners.

Without updated guidance, local planning authorities will still struggle to challenge financial viability assessments submitted by developers and may fail to receive the amount of developer contributions they are entitled to. Viability assessments are an important tool to ensure that sites are financially feasible for developers and to make sure development takes place. However, there is an asymmetry of skills, capacity and resources between LPAs and developers which means that LPAs often struggle to challenge developers' claims in viability assessments. The Department acknowledges that existing planning practice guidance on viability needs updating, and states that it will publish reforms to the guidance in 2025. The Department promises that the use of late-stage viability reviews will be considered as part of the wider update of viability guidance.

Recommendation 5. The Department should ensure that its revised guidance on viability balances the need for site-by-site flexibility in negotiations with the need to dissuade developers from gaming the system. The Department should provide an update on its progress in its Treasury Minute response.

Given the shortage of social housing, it is unacceptable that unsold homes funded through Section 106 agreements are sitting empty. There is a growing problem of registered providers of social housing (RPs) not buying affordable homes funded by Section 106 agreements. In response, in December 2024, Homes England began the Section 106 Affordable Housing Clearing Service that allows developers to upload details of new homes for which they have been unable to find a buyer, and encourages buyers and sellers to connect. The Department reports that, at the time we took evidence, over 100 local authorities, over 100 developers and nearly 200 RPs had registered for the Clearing Service. The Department also reports that around 800 unsold homes have been listed on the Clearing Service, which is far below the figure of at least 17,000 that exist across the country according to a survey by the Home Builders Federation. The Department accepts that it is unclear why there is such a significant difference in the numbers of unsold affordable homes, and explains that it is engaging with the Home Builders Federation to try to understand better what is going on.

Recommendation 6. In its Treasury Minute response, the Department should set out how it will diagnose the extent of the Section 106 affordable housing problem more confidently, and how it will ensure the Section 106 Affordable Housing Clearing Service is working much more effectively.

The Department does not facilitate effective communication or the sharing of best practice between stakeholders. Given that developer contributions help to fund a wide range of infrastructure such as schools, health facilities and roads, other government departments have a clear interest in the system. But they have mixed views on the quality and timeliness of communication with the Department. It explains that it is considering establishing a standing forum for government departments to share information, discuss relevant policy updates and identify areas of overlap. LPAs have also expressed a desire for more direct engagement with the Department on planning matters and live issues relating to developer contributions. There is variation across the country in how well local bodies engage with the system and co-operate with each other. Despite the devolved nations having similar systems of developer contributions, and some of the same issues, there is no formal mechanism for the Department to communicate and share best practice across the UK.

Recommendation 7. In its Treasury Minute response, the Department should provide the Committee with further details of how it will sponsor more effective communication between: government departments that have a stake in developer contributions; local planning authorities and other local bodies; and the devolved nations, to share best practice.